UPDATE 2-Canada housing starts up for 2nd straight month

* June starts at seasonally adjusted rate of 140,700 units

* First back-to-back gain since September

* Prairies lead starts with 59 pct increase (Updated throughout)

By Ka Yan Ng

TORONTO, July 9 (Reuters) - Canadian housing starts rose in in June for a second consecutive month, adding further proof that the sector was on the mend after building activity fell to a nine-year low earlier this year.

New home construction rose 8 percent last month to a seasonally adjusted rate of 140,700 units, beating average expectations of 130,000 starts, and encompassing both single and multiple segments, Canada Mortgage and Housing Corp said on Thursday.

It was the first back-to-back gain since August-September figures last year, and about 20 percent higher than the low hit in April. The May figure was upwardly revised to 130,300 units from 128,400 previously, well ahead of April's 117,600 starts.

The seasonally adjusted annual rate of urban starts increased 9.5 percent to 120,100 units in June, while rural starts were estimated at 20,600 units.

"There's evidence of some stabilization in the sector itself, not only this report but other reports have also shown some buoyancy -- particularly existing home sales," said Millan Mulraine, economics strategist at TD Securities.

Sales of previously owned homes climbed for a fourth straight month, according to the latest Canadian Real Estate Association data [ID:nN07293340], while data earlier this week showed the value of building permits leapt in May from April, far surpassing expectations. [ID:nN07293340]

New construction of urban multiple dwellings, such as condos, rose 11.3 percent to 67,000 units, while urban single family home starts rose 7.3 percent to 53,100 units in June.

Regionally, the Prairies led the country with a 59.4 percent increase in seasonally adjusted urban starts, followed by a 25 percent climb in British Columbia. Ontario starts were 3.1 percent higher.

Urban starts declined by 6.3 percent in Quebec and by 3.9 percent in Atlantic Canada.

IMMIGRANTS DRIVE HOUSING DEMAND

In a separate report, Scotia Capital said new immigrants were driving housing demand and narrowing the home ownership gap with their Canadian-born counterparts.

Using the latest census statistics from 2006, Scotia Capital found that nearly 72 percent of immigrants lived in a dwelling owned by a household member, up from 68 percent in 2001. By comparison, the data showed a 2 point rise over this period, to 75 percent from 73 percent, for the Canadian-born population.

New immigrants tend to rent upon arriving in Canada, but eventually make the move to home ownership.

"As recent immigrants to Canada make the transition from renter to owner, they will increasingly drive housing demand," said Adrienne Warren, senior economist at Scotia Economics.

The majority of immigrants, about 69 percent between 2001 and 2006, settled in Canada's three largest metropolitan areas -- Toronto, Montreal and Vancouver -- and their surrounding municipalities.

Between 2001 and 2006, the home ownership rate rose for all immigrant groups, regardless of how long they had resided in Canada, Warren said. (Additional reporting by Jennifer Kwan; editing by Rob Wilson)